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Definity CEO Rowan Saunders in Toronto on Nov. 23, 2021. The property and casualty insurer is among only a few Canadian companies that experienced success after an IPO last year.Handout

Weak market conditions could produce a larger pipeline of companies looking for new ownership, according to Definity Financial Corp. DFY-T chief executive Rowan Saunders, who has been on a quest for acquisitions since the property and casualty insurer went public in November.

“When times are more stressful, and there is more volatility and uncertainty in markets, it can free up opportunities,” he said in an interview. “So should the environment get more challenging for some people, that could help be a catalyst for them to consider strategic alternatives.”

Definity closed Canada’s largest initial public offering of 2021 – and the third-largest IPO in the history of the Toronto Stock Exchange – when it sold about $1.6-billion worth of shares on the public market last fall. At the same time, the company sold another $759-million of shares to two institutional buyers through a private placement. Healthcare of Ontario Pension Plan bought $507-million worth, and Swiss Re Investments Holding Co. Ltd., a reinsurer, bought $252-million.

The IPO market has seen a number of lacklustre debuts over the past year, particularly in the technology sector, where there has been a massive sell-off of stocks in recent months.

Definity, based in Waterloo, Ont., is among only a few Canadian companies that experienced success after an IPO last year. Its share price reached a high of over $35 in early June, from an opening price of $27.17. It has been operating for 150 years and started the process of going public nine years ago.

On Monday, the insurer’s common shares will be added to the S&P/TSX Composite Index, the principal benchmark for the Canadian equity markets.

Joining the composite index will give Definity a new pool of investors. The fate of those newcomers’ bets on the company may depend partly upon Mr. Saunders’s ability to grow his market share by making acquisition deals, despite market conditions.

He said he is in active discussions with potential targets, adding that he has more than $1-billion of accessible cash to spend if the right opportunities come to the table.

“These times are always opportunistic for someone like us, who is looking to deploy capital. But you do need to have sellers in the marketplace,” he added.

Definity had more than $7.5-billion in assets as of March 31, and is currently the seventh-largest P&C insurer in Canada. It is the parent company of Economical Insurance Co., Family Insurance Solutions Inc., Petline Insurance Co. and Sonnet Insurance Co., a fully digital insurance platform that sells directly to consumers.

But Mr. Saunders said he wants to be among the top five P&C insurers.

To get there, he is aiming to target markets that large global insurers have been exiting, such as corporate errors and omissions insurance, construction and manufacturing insurance and other commercial lines. Currently, the company’s commercial business makes up about 28 per cent of its annual premium revenue. Mr. Saunders said he would like to bring that up to 30 per cent.

He expects to increase the company’s annual revenue by about 10 per cent – twice the historic expansion rate of the industry in Canada, and a number he said Definity has been exceeding over the past several quarters.

The insurance industry, including Definity, is widely expected to receive a boost from the current higher-interest-rate environment, because insurance companies are more heavily invested in the fixed-income market than their counterparts in other industries.

“The reality is that we’re a very resilient business and in many ways are recession-proof,” Mr. Saunders said. “People need insurance to drive their cars and they need it to run their companies. … People are thinking ahead and asking, ‘Will you perform as well in a different environment?’ And we believe we will.”

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